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INDIA EDITION

Private labels are coming into their ownPage 32

What’s In-Store?

Cover August 2012.indd 1 7/31/2012 6:00:46 PM

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Quality CountsPrivate labels (PLs) are coming into their own. Emulating the PL success of large format retailers like Big Bazaar, HyperCity, Spencer’s, etc, are regional retailers, namely, Nilgris, SRS Value Bazaar, Direct2U, Needs Supermarket, etc, who are building their PL brands with equal gusto.

It’s no longer so much about PLs lower price points, than their parity with national brands (NBs), especially with respect to quality - including packaging and labelling. Once considered as cheaper alternatives to national brands, today, retailers are developing and positioning them as part of their retail strategy, so much so that many PLs are being launched with value additions and in premium categories as well.

In fact, growth of PL brands has been quite impressive in the food and grocery segment, in spite of the presence of leading NBs in most of the categories. Industry analysts estimate that PLs in this segment are expected to grow at a compounded annual growth rate of 30 percent for the next fi ve years.

However, it is important that the retailer’s PL should add to the strength of the core brand – even enhance the positive imagery that the retail brand may be enjoying. So, the product’s features, pricing and user experience should be such that it merits repeat purchases.

In this issue, we have featured two well-known retail chains - SRS Value Bazaar in Delhi-NCR and Spice Route in the South, besides Italian retailer Glorioso’s in Milwaukee, USA, whose historic Italian Market has undergone an impressive makeover. A respected name in the state of Wisconsin, it continues to retain its 65 year-old reputation for quality and service, along with its Old-World charm.

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Editor Notes_August_2012.indd 4 8/1/2012 11:45:25 AM


Contents

COVER STORY32 What’s In-Store? Private labels of national retail chains are competing with

national brands on price points, quality and customer loyalty. Close on their heels are regional retailers whose private label brands are also coming into their own

FEATURES18 Progressive Views Good quality data is fundamental to increasing effi ciency

22 Interface Anil Jindal reveals the management strategies and

operational challenges at SRS Value Bazaar retail chain

28 Interface MNV Prasad, GM - Sales & Marketing at Indo Nissen -

discusses the brand’s makeover

30 Retailing Trends presents the “Future of Food Retail” Key lessons in tapping shopper potential

SUPERMARKET GROCERY BUSINESS44 Retailer of the Month Kannan Doss, Director, Geetha Kannan Spices, explains the

conceptualisation of his specialty Spice Route stores

48 Store of the Month Younger generation’s vision secures the future for Glorioso’s

Italian Market in Milwaukee

A U G U S T 2 0 1 2 • V O L U M E 6 • N U M B E R 8

54 Retailing’s New Wave Food retailing landscape during the ‘80s

SUPERMARKET FRESH FOOD BUSINESS56 Meal Ticket Fresh produce is the hottest trend in today’s supermarket

foodservice

DEPARTMENTS8 Market Update What’s new in the F&G market

12 Round Up National and International company updates

58 Category Watch The emergence of organised retail, and demand for

branded products is giving a new dimension to baby personal care

63 Supply & Distribution India’s complex food supply chain needs an apt

infrastructure

66 Product Watch Wine retailing is gaining acceptance as consumers prefer to

purchase wine from organised retail formats

70 Marketing Bringing food retailers and suppliers together

73 What’s Next New products in the market

Contents_August_2012.indd 6 7/31/2012 6:12:58 PM


and enabling factors such as locations with clean surroundings, enough parking space, well-lit area at night and overall safety of the area. We also opt locations where the consumers can indulge in other activities such as amusement centre, lifestyle shopping and important commercial centres, as it adds up to the attractiveness of the location. Investment in setting up a new store too depends a lot on the location, size, consumer profi le, etc. However, for a mid-sized store, an amount of around Rs 1.25 crore would be required, though this fi gure may vary depending on various factors.

Building ValueSRS Group, a diversifi ed conglomerate, entered the food and grocery

retail business through its fl agship company SRS Limited in 2006. Today, the company operates 18 SRS Value Bazaar stores, spread across Delhi, Faridabad, Gurgaon and Noida. Chairman Anil Jindal talks about management strategies, operational challenges, and

expansion plans of the retail chain with Juhi Sharma

Interface

Anil Jindal, Chairman, SRS Group Northern India will see 20 more outlets over the next one and a half years

What are the key factors for selecting a store location?Selecting a location plays a key role in defi ning the success or failure of a retail venture, with all other variables remaining constant. So, while selecting a site, some of the important factors, we emphasise on include the catchment area – the customer profi le, as we target middle to upper-middle segment; and demographics - we choose locations where the market has attractive headroom for growth, and avoid areas where there is an over-supply of retail. We prefer easily accessible and visible locations

What are the broad F&G categories in your stores?Broadly, food enjoys 60 percent share and the balance 40 percent in our stores is non-food. Imported foods constitute 3-5 percent share in the overall food and grocery section and they generate about 6 percent revenue. We have PLs in food, non-food and garment sections. In food, we have SRS Value Bazaar branded pulses, sugar, dry fruits, spices, etc. In home care section, we have PLs such as Sure Shine, a range of household cleaners. PLs are important in the F&G segment as we

Interface_SRS_August_2012.indd 22 7/31/2012 3:50:22 PM

www.imagesfood.com AHEAD OF WHAT’S NEXT AUGUST 2012 • PROGRESSIVE GROCER • 23

have observed that these in-house labels enjoy a fairly high level of loyalty amongst our shoppers. So we wish to continue with our offerings and expand the portfolio gradually to include other product categories such as tea and oils. Overall, PLs contribute about 17-18 percent of sales revenue.

How do you analyse sales and take business decisions?We intend to grow by 22-25 percent by the end of the current fi scal on account of increase in same store sales, new launches, new customer acquisition, old customer retention and robust back and front-end systems. Two factors provide us a valuable advantage to analyse sales and take sound business decisions. One is our crystal clear positioning with a focus on our core target consumer segment, and the other is a strong understanding of their needs and aspirations. This understanding allows us to fi ne tune our offerings and services dynamically to stay most relevant for our customers and offer value for money and time. We undertake regular consumer appreciation exercises so as to understand how we could be more relevant and vibrant for our consumers, and also identify the gaps and opportunities. Sales analytics also tell us what kinds of categories, brands and skus make sense for our customers, and what don’t, and together this enables us to have a closer match. We also get to learn the effect of our various schemes and promotions, and thus are able to engineer the ones that consumers appreciate the most. For example, during the last few months, we initiated an offer wherein we gave 1 kg sugar free on a purchase of Rs 299 – this drove footfalls as it was a great reward for our regular consumers. This promotion elicited a very enthusiastic response from our customers who felt good about our brand.

How does SRS Value Bazaar ensure a good customer experience?The good feeling a customer has is the sum effect of several factors and efforts such as her past experience, the feel upon entering the store, overall layout, lighting and air-conditioning, quality of staff, check-out time, on-going schemes and so on. So we focus on each and every such aspect, and try to give a superb shopping experience to them every time. This includes having an effective planogram for the store, matching products and services in line with their needs and aspirations, having a helpful and friendly customer care executive. When they enter

SRS Value Bazaar, we want them to feel they have entered a premium and pleasing retail store that will offer them the best of the products and brands at the very best prices. We aim to make them feel assured that caring and smiling help is always at hand, and thrill them with small surprises. All our efforts are directed towards making them actually enjoy their shopping and walk around the stores freely, leaving all their worries and stress at the entry gate. We also want them to think that its lucky to have an SRS Vlaue Bazaar store close by, and this the best place they could have come to.

How well is the staff trained?We place our customer care staff around the store in a manner that they are visible, yet not obtrusive. They are trained to know when the customer is looking around and checking things, and when does she need help. Our team also looks at what the customer is buying, and in case there is a better deal available, they make the suggestion. The staff also helps the customers with their shopping

carts, product selection, query and complaint resolution as well as a smooth check-out. We have a loyalty programme and we are in the process of migrating to a higher level. We also, however, believe that even if a consumer is not a member of this programme, she deserves to be delighted with great deals, so we offer this to all our customers, and top up the benefi ts a bit more for the loyalty programme members.

What technologies have the stores deployed?Technological adoption is also quite intensive in our stores; however, we take care to

adopt solutions that make a difference to our operations and customer-service. We use one of the best billing accounting softwares to keep a tab on things and ensure smooth operations. We have implemented an Automatic Replenishment System that ensures top fi ll rates for each store as well as for the centralised purchases. We manage top-of-the-line fi ll rates as the system automates re-ordering levels for the shelves,

We take care to adopt technological solutions that make a difference to our operations and customer-focus, rather than just by way of novelty or ancillary value

Imported foods constitute 3-5 percent share in the overall food and grocery section

Interface_SRS_August_2012.indd 23 7/31/2012 3:50:27 PM

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Private labels are popular with national retail chains because of their potential to increase store profi tability

and loyalty, control over shelf space, and bargaining power over manufacturers. Close on their heels are regional retailers

who are piling on own brands in their stores

By Seema Gupta

Cover Story

What’s In-Store?

Cover Story_August_2012.indd 32 7/31/2012 5:01:25 PM


In recent years, big ticket food, grocery and FMCG retailers have been introducing a gamut of private labels (PLs) across (mainly) food categories from fl ours, sugar, snacks, etc, to household cleaners and

cleaning accessories. They have also taken their private labels to a whole new level with smart packaging and labelling, and clever marketing, so much so that consumers often fi nd it diffi cult to differentiate a private label product from a national.

Comments Prof Lakshmi Nair, Assistant Professor at Indira School of Business Studies, Pune, “Though initially, private label brands (PLBs) were considered cheap alternatives to national brands (NBs), and, therefore, visible largely in copycat and generic categories, today, they are a part of a well-defi ned retail mix strategy, and are developed with value additions and in premium categories for profi t maximisation and customer loyalty.”

Retailers can have a greater control on the supply chain with their own PLs, and have less stock-outs, better customer satisfaction leading to improved customer loyalty. The presence of private labels in the portfolio allows them better negotiating power with the national brand manufacturers,” says Sandeep Puri, Faculty – IMT Ghaziabad.

The growth of PLBs is quite impressive in food and grocery segment, in spite of the presence of leading NBs in most of the categories. Among consumers, one obvious reason for their popularity is their price advantage (averaging 21%) over national brands. A KPMG report reveals that in India some of the major food and grocery retailers average 20 to 30 percent private label penetration, peaking at around 50 percent. Accordiing to Nielsen Shopper Trend study. PLs accounted for almost 6 percent of total modern trade sales in urban India in 2011. The top fi ve categories are packaged rice, fl oor cleaners, tissue paper, glass cleaner and packaged fl our; with as many as 36 consumer products including breakfast cereals, detergent, fragrance and packaged tea.

In the US, the past two decades have seen the rise of PLs as measured by sales and shares within product categories. From 18 percent of US households using PLs in 2000, the number increased to 27 percent in 2011.

Consolidation of organised retailing boosting PLsAccording to Puri, the most critical factor behind the rise of the global private label market has been the development and consolidation of retail chains all over the

globe. Rising GDP growth, burgeoning population, greater disposable income, changing consumer preferences and shopping habits are driving the global retail industry and creating fresh opportunities for retail segment players; inversely, growth in organised retailing is facilitating development of PLs.

Says Puri, “International retailers like Wal-Mart, Carrefour, and Tesco, operating with strong private labels, are expanding rapidly into developing markets. This has greatly enhanced the availability of private label products and has forced even local retailers in countries like India to develop their own PLs to remain competitive.”

Observes Anil Jindal, Chairman, SRS Value Bazaar, “There is a paradigm shift in customers’ purchasing behaviour towards PLBs. As retailers are growing their PLs with great fi nesse and customer orientation, PLBs are giving a tough competition to NB counterparts by means of price-value proposition. Customers acknowledge and accept that today’s PL brands have transcended the negative baggage and problems of traditional store brands of the past, and they offer unique, resonant benefi t at competitive prices. In fact, for established retail brands, their private labels may be seen as a much superior option compared to the popular brands.”

According to Prof Nair, for developing markets like India, where private label penetration is very low, these trends can be replicated through expansion of modern retail from the current 10 to 20-30 percent, which will increase the level of investments, and remove supply chain challenges.

Opportunities in own brandsTechnopak’s Private Label Report 2012 states that food and grocery segment is a key driver for PLs accounting for 20-25 percent, and sometimes even 40 percent, of all categories in PLs. Says Pakhie Saxena, Associate Director- Retail at Technopak, “With high real estate outlay, escalating operating and manpower costs, profitability and viability are the vital concerns for large-format retailers due to which thus enhanced margins tend to be the primary reason for introducing store labels in the initial stages. Commodities such as staple foods, home care products and utilities tend to find easier acceptance by consumers even as PLs. Retailers are leveraging this opportunity and have a nearly 10 to 30 percent contribution from store labels across these categories.”

“There is a huge opportunity for Indian retailers to build scale with PLs,” says Devendra Chawla, President, Food & FMCG, Future Group. In his view, although India has the dubious distinction of being the most under-branded and under-penetrated country, on the other hand, the country is also one of the most brand conscious too. “We are a very unbranded country; categories are yet to start in India,” he remarks.

In fact, the responsibility of retailers towards PLs has risen signifi cantly over the last few years as developing and nurturing a community brand defi nitely works for a private labeller. In Big Bazaar stores, PLs are among the bestsellers in at least a dozen product segments. They owe their success to experimentation and trials by consumers,

What’s driving growth?

• Signifi cant point of differentiation versus national brands• Retailers want to be distinct versus other retailers• Tiered levels of product assortment• Consumers believe that product quality is good as or better than national brands• Repeat purchases• Higher profi t margins than national brands• Retailers are behaving like CPG manufacturers• Packaging and design innovation are driving trial• Retailers are focussed on their brand• Greater leverage in negotiating with manufacturers• Increasing skus, organic private brands and multiple tiers• Growth is driven by current and new shoppers to the category• More display and shelf space, sales promotions and advertising budgets

SOURCE: FOOD MARKETING INSTITUTE

Cover Story_August_2012.indd 33 7/31/2012 5:01:42 PM


Retailer of the Month

By Roshna Chandran

Kannan Doss, Director, Geetha Kannan Spices, explains the conceptualisation of his specialty Spice Route stores

Spiced Up

Spice Route stores are a logical extension of our business modelWe came up with the idea of retailing our products because we wanted to experience fi rst hand want consumers look for so that we could directly meet their needs. We also thought that why would a consumer walk into a store and only buy spices; why not wine, cheese or anything else? We also thought that if a customer could walk into exclusive stores for wine and cheese, then why not make our store exclusive. So we decided to expand our product portfolio.

There are specialty shops that cater to a very niche market, for instance, coffee brands such as Kannan Jubliee Coffee, Narasen’s

Coffee, Rama Coffee, etc, have been retailing exclusively for over 50 years. When coffee can sell as a single product in a shop – a drink that one can enjoy at home, so why not spices? Therefore, we decided to create a vegetarian domain in which we would sell our products in a manner which makes the consumer feels pampered. At our stores, we take the time to explain to the customers how the various spices and ingredients can be used, and in what way it can make a difference to their cooking.

A connoisseur of food is our best customer. The look and feel of our stores help us to sell exotic spices sourced from different countries. For instance, we have pine nuts from Pakistan

and saffron from Iran, Spain and Kashmir. Sometimes it baffl es some customers but for us the sourcing has been a very tiring process but worth it. The margins that we have are also very good. For instance, we buy the saffron for Rs 1,800, and make a profi t of Rs150 or more.

I want to be in malls - it is easy to quitAll our Spice Route stores are in malls. I want to be in malls - it is easy to quit! We are closing our store in Mangalore City Centre, which is the best mall in Mangalore, but the city has not matured. A city or town may have the most fabulous mall, but if it is not matured, the mall will not do well. Our store did not do well as there was hardly any traffi c. The

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appreciation to our store concept was lacking. Having learned from the experience, I felt that my new stores would only be in big cities like Aurangabad, Coimbatore and Trichi, but not Mysore or Madhurai. In my view, the town/city has to be cosmopolitan too, not just well populated.

Our store at Express Mall in Chennai is doing very well, in fact, it is our best performing store. The store at Mantri Mall in Malleshwaram, Bangalore, has gone down, but one in Central Mall in Bangalore is gradually catching on.

A mall is easy to disengage from because the lock-in period is only for a year, after which one can give a three-month notice, get your deposit back, and your furniture and fi xtures are yours to take out. If you have not paid your rentals, then the deposit gets adjusted.

Gaining practical knowledge is importantThe biggest challenges of opening a store in a mall are waiting for your brand name to be recognised, getting traffi c to the store, and bringing in potential investors. Visitors to our stores love our concept, and are amazed at seeing customers walking in simply to buy spices. We did make the mistake of resting with that satisfaction. We should have immediately got someone to handle institutional sales and corporate gifting rather than looking at the 30,000 footfalls that come to a mall.

Another challenge has been operating a big format store with over 440 skus and a back-end supply of just one or two outlets. One requires a strong supply chain that will help

Kannan Doss, Director, Geetha Kannan Spices

The retailer aims to get 100 customers with an average bill size of Rs 300 per customer

Taking the Spice Route

Opened: November 2010 (Mantri Mall, Malleshwaram, Bangalore)

Area: 800 to 1000 sqft

Turnover: Rs 20,000 per day

Current number of stores: 4 in India, 1 in Kuala Lumpur

Investment: Rs 40-60 lakhs

Product categories: Spices, nuts, lentils, organic products, tea, coffee, cakes, herbal drinks

Fastest moving products: Saffron, nuts, lemon grass, lavender, mosquito oil and spray, coconut oil, toor dal, organic products

Price range: Rs 10 to Rs 3,000

Average footfall: 100

Average billing: Rs 550 across all 5 stores

sustain a regular fi ll rate at all the stores so that the retailer does not have to face an out-of-stock situation, and turn away customers.

Whenever you think of a new concept, no matter how much that concept is close to your heart, it is important to fi rst experiment with it in a real setting, and be open to feedback good or bad from the consumers. This should

be seen as a learning process so that where necessary you can make changes in the existing model. I started Geetha Kannan Spices in 2001, and opened the store only in 2010. For 9 years we were only supplying the products across the country during which time, Geetha Kannan Spices was the interface with our corporate associates. The practical lessons

ROTM_Spice_August_2012.indd 45 7/31/2012 6:18:50 PM


Category Watch

Minding Baby’s BusinessThe emergence of organised retail, changing parental

behaviour, and demand for branded products are giving a new dimension to baby personal care

By Juhi Sharma

Baby care is a primary concern for every mother and efforts to tap this concern has made baby care an important segment for manufacturers and retailers of

both independent stores and supermarket/hypermarket chains. The baby care market comprises of massage oil, diapers, baby food and skin care.

While the developed nations have almost reached stagnation point in the growth of baby care products, there is a huge potential in developing markets. In India, the emergence of organised retail, changing parental behaviour, and demand for branded products are giving a new dimension to the category.

In fact, in India, the category, long considered as niche, is gradually evolving into a

mass category, and becoming highly lucrative. Rising incomes, greater awareness, and other psychographic changes have widened the reach and acceptance of baby care products - a phenomenon that is being witnessed across cities, regions and rural markets of the country.

A 2011 report ‘Baby care in India’ by Euromonitor International revealed that value sales growth of baby care in 2010 was slightly faster than in 2009, with growth of over 9 percent. An increasing number of affl uent households, particularly in urban areas, as well as the wider availability of baby care products in both modern and traditional stores has helped to drive growth in this segment. Sales grew by over Rs 1,900 mn between 2005 and 2010. (In 2005, sales were Rs 3,898.8 mn and grew to Rs 5,866.8 mn.)

By 2010, supermarkets and hypermarkets were holding 15 percent share of baby care sales by value, and they continued to make steady inroads into what was previously the preserve of neighbourhood stores, chemists and pharmacies. It is envisaged that as supermarket and hypermarket chains expand into smaller cities, their share of baby care sales will get a further boost.

Brand watchThe credit for introducing baby care category in India goes to Johnson & Johnson, which in the 1940s started marketing Johnson’s baby powder, one of the fi rst baby care products manufactured by a local company, British Drug House, based in Mumbai. With a legacy of over 100 years, the Johnson’s Baby brand remains

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Category Watch_Baby Care_August_2012.indd 58 7/31/2012 3:53:21 PM

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